During 2004, significant amendments were made to the Protection of Investors (Bailiwick of Guernsey) Law 1987 in order to prohibit market abuse. The market abuse regime in Guernsey is now closely modelled on that in the UK, although the penalties in Guernsey are more severe. The Guernsey Financial Services Commission (GFSC) is also expected to release a code of market conduct to complement the market abuse legislation.
The Regulation of Investigatory Powers (Bailiwick of Guernsey) Law 2003 is a truly modern law, which provides for the interception of postal and electronic communications and the disclosure of related information, as well as covert intelligence and intrusive surveillance.
On a more positive note, the office of public trustee has now been established under the Public Trustee (Bailiwick of Guernsey) Law 2002. Where the governing law, trustee or property of a trust is situated in the Bailiwick, the public trustee can be appointed either by agreement between the persons entitled to appoint trustees, or unilaterally by the court on the application of, for example, the GFSC, the settlor or the beneficiaries.
A comprehensive review of the Companies (Guernsey) Laws 1994-1996 is well underway and is expected to follow closely on the heels of welcome revisions to the insolvency laws. It is widely accepted on the island that the Control of Borrowing Ordinances will be repealed as part of the review of the Companies Law and that this will necessitate further amendments to the Protection of Investors (Bailiwick of Guernsey) Law 1987.
Legislation in respect of IP rights is also anticipated. Amendments to the Limited Partnerships (Guernsey) Law 1995 are expected to follow a consultation exercise.
Enabling legislation has been passed by the States of Guernsey in respect of the EU Savings Tax Directive, and implementation of equivalent measures in Guernsey? domestic law may now follow. The EU Savings Tax Directive, if it comes into force, will only affect savings income paid to individuals resident in the EU.
2004 saw a number of minor regulatory developments intended to keep the island? regulation of financial services businesses up to date. These minor amendments address the outsourcing of money laundering checks to intermediaries (in line with Financial Action Task Force recommendations) and the restriction on ‘spam’ electronic communications (in line with data protection principles). Other regulatory developments included the complete revision of the Class A Rules, which govern the operation of retail collective investment schemes.
The GFSC has encouraged the use of Guernsey as a domicile for hedge funds by acknowledging the proper role in hedge fund structures of London-based prime brokers in place of local custodians; the GFSC has also begun consultation on a streamlined authorisation process for investment funds that are set to be promoted to “qualified investors”.
From a political perspective, there have been four interesting legal developments during the course of 2004.
First, following recent elections, the machinery of government has been completely overhauled, with the result that there is now a modified ‘cabinet’ style of government with a titular head in the form of the Chief Minister and with streamlined departments of governments. It should be noted, however, that ministers are elected by the States of Guernsey and that these departments are still based on a committee system.
Second, for the first time, the island has entered into direct treaty negotiations with third countries, most of which take the form of double taxation treaties, as well as separate bilateral agreements with each of the member states of the EU in respect of withholding tax.
Third, the text of Protocol Three of the UK’s Treaty of Accession to the Treaty of Rome has been retained in the proposed EU constitution; in the event that the EU constitution is ratified by all the EU member states, Guernsey will therefore remain outside the EU for most purposes (with the notable exception of the free movement of goods).
Fourth, the division of legislative responsibilities between the States of Guernsey and the Parliament at Westminster is set to be the subject of an appeal by the States of Guernsey to the Privy Council in respect of offshore fishing licences.
Benjamin Wrench is an associate at Ozannes, Guernsey